tv The Kudlow Report CNBC March 20, 2013 7:00pm-8:00pm EDT
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ben bernanke is ben bernanke is masterful. lots of people complained about him. i see there's nothing to complain about. he's doing the right thing. he doesn't want to repeat of 1937. i don't want one either. ial prous to >> good evening everyone and welcome in, this is "the kudlow report." obama arrives in israel to cement our relationship with our great allie and he and netanyahu must deal with series issues. president obama is said that the use of chemical weapon this is in syria would be a game-changer. quote unquote, now back here the markets get back to rally mode. but, did the fed-head ever so
subtly indicate an every so slightly less easy posture? that is my take and we will debate it later on. here is something that investors and businesses and consumers do not want to hear, it's a new tax on the internet. even downloads from ituness, who thinks that is a good idea? not me, here is good news "the kudlow report" begins right now. president obama in israel for the first same in his presidency, securing the relations with the allie in the middle east, here is what he had to say when greeted by benjamin netanyahu. it's in our fundamental security interest to stand with israel.
it makes us both stronger and more prosperous and makes the world a better place. >> so question is, what exactly is the president hoping to accomplish in israel. here now we republican former u.s. ambassador and dan senor the coauthor of start up nation. joining me here on set for the hour, ryan grim, huff post washington bureau chief, and tony frato, former white house deputy press secretary. welcome to one and all, if i may go to you first, ambassador, there's all this media chatter that i'm reading today that president obama the not know what he wants to do and he has no agenda. it's said that he was the first u.s. president to visit israel as a tourist. okay, do you feel that obama has
no agenda items at all as the middle east is unraffivaling in >> -- unraveling? >> no, he has a real agenda, to introduce himself to the people of israel as a friend. everything that he said says that, that he has their back, that he will be in the trenches with them when the chips are down and he cares about their security and he will not let iran get nuclear weapons. that is his message and the purpose is to improve his standing with the public of israel. he is at a ten-point approval rating. we will see a bounce because of the way he is embraced by the prime minister. that will be important because a high public opinion approval rating in israel will make the
prime minister and the israely government more carol abo-- mor about standing up to him. >> i want to continue this idea that they will not be able to discuss anything. am i dreaming, aren't they going to talk about the iran threat and syria and the massive problems there and egypt. the region in some sense is unraveling, dan, president obama knows that. prime minister netanyahu knows that. cou so, can they get manage out of this? >> there's a lot to talk b but a lot of it is relationship repair. the first term the president, to borrow his phrase, he pursued a strategy in the middle east in which he wanted distance. he said that his u.s. relationship was perceived to close to the prime minister of israel. and so they needed to create space. here he is four years later,
nothing to show for it, there's trust issues between the president and the palestinian leaders, so he is trying something different. coming to israel. bear hugging them and sending a message that they are close. as it relates to specifics, absolutely they will be discussing iran and syria and one of the things that the president will want is to reassure israel that he has their back and that he is as committed to prevention of iran developing a nuclear weapon as they are, but he needs time and pace to try to pursue a diplomatic process before anyone seriously contemplates military action. >> quick online th-- quickly on that before i go to martin, what about netanyahu's red line of the nuclearization in iran? what about that red line? last september at the u.n. netanyahu said it was spring or
summer, that deadline is approaching, what happens there? >> there's a gulf between what the prime minister articulated was the red line and the president said we have a year. so that is where i think a lot of discussions that are happening now will crackcracklet is the difference, and what they will discuss. he said don't worry to israel leaders, as martin said and the president said, i have your back, even if you do not believe you have the capabilities to deal with iran crossing what you perceive as your red line, we have the capability. and the prime minister preempted that, and he said united states is a great friend and mr. president, you are a great friend, but even to great friends we cannot trust the fate of our security. >> this is a coming together. so things are a little better.
syria, president obama said today, use of chemical weapons in syria would be quote unquota game changer and i have to believe he is serious about that. >> what is your take on it? >> to comment on dan and iran, i think it's important, the president again in his press conference today with the prime minister put out that one-year timeline and while the prime minister said that they are getting close to his red line, he basically wanted to avoid creating a problem between him and the president. and i think that they are actually closer to where the president wants netanyahu to be on this, which is to give him time for diplomacy to try to exhaust that. at the same time, he has come closer to the prime minister in assuring him that if it does not work, he will take action. >> quickly on syria. >> in syria, if you go back and look at the president's language on this, he said that it would be a red line for me if syria
used chemical weapons. today he said that it would be a game changer for the international community and that, i think is bit on of a shift. >> how do you interpret that? >> that is coming. you know the rumors that they are going to be used. >> it's a way of not taking action, so, i think he is reluctant to get involved in syria and the syrians regime is testing him. i think what happened with the use of chemical weapons, it was a test. if he shucks and jives on this, i'm afraid we will see the use of chemical weapons. >> did president pullback on that day? >> i think he did a bit. this he same to have their interests aligned better with iran and less so with syria right now and we don't see the palestinian solution issue on
the table at all right now. and i think that is the distraction for the white house right now on the trip. >> ryan grim just to bring you in before we lose everyone on this topic. do you think that president obama can leave israel with something concrete. what is the buzz? what do you think? >> he will not leave with anything concrete that he c-- that he can announce. but he will leave with a better understanding of how to deal with the issues. >> what about egypt? they are going nuts. they seem to hate everyone, it drives me crazy the egyptian story. >> there's so much going on, that as long as it is contained in egypt to use that loaded term, then they are probably going to be fine with letting that play out, quote unquote democratically. >> as always, wish we had more
time to purpose -- to pursue that. back here at home, we are facing a threat of an internet itunes tax, that is right, a bill in the senate would mandate that all e-commerce sales must pay state sales taxes for the first time. that includes downloads like itunes, it's a massive tax grab and expansion that must be stopped. later in the show, the finance minister from cyprus is asking for a bail out. they will keep their banks closed for another week. we will have reports coming up from moscow and cyprus. i'm kudlow, we will be right back.
state and federal government. taxing the internet wherever it is. we bring in carol roth. she is a former investment banker and best selling author. ryan grimm and tony fratto are still with us, carol, this is a big hunk of a tax grab. that's the way i see it. >> they call it the fairness act. it's not about fairness, it's about taxation. this is going to kill small businesses. we already have small businesses trying to co-- trying to comply we need to get then expanding their businesses and not doing paperwork. >> in terms of damaging the small business. the small business sets up an e-commerce internet website. now they go direct, whoever buys buy, whatever state you pay the tax if you are crossing state lines you do not pay tax. they have to have lawyers now, accountants and --
>> 9600 jurisdictions that they have to keep track of. and each one had that is a different set of rules and regulations. i hear the argument, it's not a big deal that someone will figure it out with software, it's not about the software, it's about compliance and aud auditing and small businesses spending time on paperwork instead of getting back to work. >> i feel it's a tax grab. what bothers me is you may favor that tax grab. that is my concern. can you dissuede me from that concern? >> i do not like this tax grab. states fund themselves with sales tax. it's the primary way that states generate, revenues for themselves. so we cannot take away the only way they generate revenue. >> some states. >> some, right, but maybe a better way to do it is to
collect the tax in the state where the psmall business exist. >> how about that? >> that is what exists now, it's across state lines that we are talking about. >> go ahead. go ahead. please. >> this is not about mom and pop businesses though. this is basically about amazon and other major retailers. the thing here is that when companies want to avoid paying taxes, they find all kinds of complex ways to do it. now, when somebody is asking them to pay taxes all of a sudden, this is too complicated for them to figure out how much they own maryland. >> mail order business has been going on for years and years nobody felt that it needed to be taxed, but now it's going to be taxed? >> this is part two of a strategy by dick durbin to raise money to merchants. the first was the swipe fee.
>> he was the swipe fee king. >> he telegraphed that he was going to do this. >> so he wants this money for chicago and illinois who is going bankrupt? >> he wants best buy and other merchants to kick in money to the democratic party so they can -- because they are tired of getting crushed by amazon. >> see, i got second, i'm a conspiracy thinker when it comes to taxes. i see it everywhere and i'm almost always right. thises the first time that -- this is the first time that the federal government can mandate companies to pay and collect state sales ta s taxes, it's on giant step to a national sales tax and i'm equally worried about your position on this too. >> i do not want to say national sales tax. i've been here before, because i love it as a very efficient tax, but it has to be a replacement tax. the federal government should
not be taxing nor the states. >> this is the first time the feds can actually order people to pay the state sales taxes. which means we are going to get around to a national mandate, that means a possible national sales tax. >> it absolutely is the first step in that direction and the problem i have here is you have taxation without representedation, they are taxing me in new york and i have no say in electing the officials in new york. >> including dick durbin. >> in illinois i have responsibility for that. >> you are taxed in the state you live in. >> for this reason, if you think bit this way, tax in the state where the business exists at the rate that is in that state, and there competition right? >> why are we talking about the
taxes, the issue is about government spending. they are creating a whole side show -- >> you remind me. i have to remind tony. we have to give money to illinois, to new york, to california, to new jersey, are you out of your mind? i have to get out of here. cut spending and don't raise taxes. now all of you stick around we have more work for you. a weak earnings report from oracle, a strong ipo and the government moves to avoid a shut down. those are top headlines coming up next. [ male announcer ] how can power consumption in china,
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>> oracle releases their earning reports after the bell and the stock takes a hit. we have the story and much more, good evening, mary. >> good evening to you, larry. oracle, the software giant comes in with weaker than expected results, the firm blaming a lack of urgency, the earning were a penny light of estimates. revenue of $9 billion was misforecast and that is why the stock took a hit. model n closing up 29%, they sell products that help firms with pricing and contracts. and the threat of a government shutdown next week is getting smaller. the senate today passing a continuing resolution that will fund the government until september 30th. the house is expected to pass it
tomorrow. one less thing for the markets to worry about, i think. there was concern about this, you know, coming or approaching month's end. this was the first time they made a deal. they really had a deal done, how rodgers and barbara mccalsky in the senate had a deal. i cannot help myself, one of part of the deal is still in there and that is no funding for obamacare, that is no funding for obamacare, do you have a thought on that? >> i don't have a thought on that, it keeps getting kicked down the road over and over and over again. eventually we have to come to the table and have a discussion. it is going to be funded or not? >> tony, i think this is a good start, myself. i'm being truthful, i do not want to fund obamacare, i think the country can do better, what is your take on this? >> look, i think if the votes are there for it, they will find
the funding for it, but i think what i would love to see is some, you know, better estimate on what the spending would be, i don't think that people really fully know what the cost of obamacare is. >> it's going to bankrupt us. >> sure. >> it will bankrupt us. >> they don't. >> let me go to you, all money bills originate in the house, what do you hear? >> they have already caved on it. we have had this conversation last couple of years. john boehner said, it's the law of the land. he walked that back afterwards, but that is what he is thinking. this is a fight that will take place in policy documents and political documents like ryan budget but when it comes to funding -- voting on bills that will become law, obamacare -- >> this continuing resolution does not have funding for bom a bomb -- for obamacare. >> it won't. >> they will find a deal to fund it through other monies, they
will not crimp it, obama will not sign thinking that will slow it down. >> we will track it, i have to jump, this is a big fed day, stocks generally liked what they heard from ben bernanke, i wonder if he was signaling a little let easy money, that is my take next up on kudlow. there's this island -- and it's got super-cute kangaroos.
welcome back to "the kudlow report." i'm larry kudlow, in half hour, the situation in cyprus is on the edge of the abyss, if russia did not bail them out, their economy will implode and they will be forced out of the euro economy entirely. and senator kelly ayotte is looking to get a budget deal without more spending and taxes and i want to know if the so-called gop reforms are going to split the party in two or make it more inclusive. senators working against a needless missile to nowhere program that she will explain to us. ben bernanke is keeping his foot firmly on the qe gas pedal or
did he? please take a listen. >> we are seeing improvement. i think one thing we would need is to make sure that it's not a temporary improvement. so, we have seen periods before where we had as many as 300,000 jobs for a couple of months and then things weakened again. an important criteria would be not just the improvement that we have seen, but is it going to be takened for a number of months. >> let's bring in experts to help walk us through this. mark olsen, a former governor and mark, welcome back, not only did the bernanke talk about the stronger economy, which has been a kudlow theme here for many, many weeks and so forth. i want you to listen to what else he said about the rate of bond purchases. can we play that tape? >> the committee could vary the pace of purchases as progress is
made toward the economic objectives, or if the cost and efficiency changes. at this point, the committee judge said no adjustment was warranted. >> so, they can vary the purchases if the economy looks better and he has all the labor market indicators, i thought he was putting us on warning that he may not do $85 billion every month this year. >> well, i think, larry, i think you are right. previous statements said that they were going to separate the bond purchases from money policy. but today he was more specific and you hit it right on the head and you introduced the sustainability quote. it seems to me that that was establishing a criteria that we have not heard quite that -- quite as specifically before. >> i'm not saying that they will
change the zero interest rate target. but i'm saying, let me go to my pal, tony fratto, i heard him say that he could slow down the bond purchases that means create less money if the economy continues to grow. >> i think that's right. we are seeing that kind of transaction in the he economy, and the chairman was clearly signaling that. he was trying to signal it with the 6.5% target as a place to look down the road when policy can change. this would be easy if we were at normalized policy rates. if we were at 5%, no one would think anything of the fed raising or lowering it by a quarter or two. that is the signaling that the market will see improvement. >> if you were ben bernanke, serious question, if you were ben bernanke what would you do right now as fed chairman? >> i would gear my policy toward a stable dollar and i certainly
would put a halt to the bond buying program. my concern with what he is talking about is, i don't think that is something that will alleviate the pressure that was on commodity prices for three years. gold has come down somewhat the last few months. >> and the dollar has gone up. >> and the fed's balance sheet right now is huge. it's going towards $4 trillion. that is my concern about this type of policy. and tony mentioned 6.5% unemployment, that is not going to happen this year. >> not this year. >> all i'm saying is they can stop the bond purchases earlier than some people think. mark, let me go to you. how does the fed unwind this? we may or may not, say we get to a $3.5 trillion sheet or a $4 trillion sheet, how does this story have a happy ending? >> it will be in increments,
larry, first they have to reduce the bond purchases and then they have the run off of the existing portfolio. at some point when we start feeling inflation pressure, we will start to see the run off take place. and the sales take place. >> when does that pressure come in your judgment? >> when does it come? >> not until 2015. simply too much liquidity in the market for it to come earlier than that. >> when do you believe the zero interest rate policy is? 2014 or 2015 in. >> 2015, and that was the central tendency today. >> doesn't the fed have one of the worst forecasting records around in. >> the problem is that they have a specific record, so it's easy to see what they have said relative to everyone else. not many other people put their forecasts on the line like that.
>> i forecast for a living. i don't know about that. thank you mark. let's do stock market work. we have mike, forbe's executive editor. i think that stocks are the best game in town. >> they are, earning are strong -- margin pressure the is the only concern. >> what is margin pressure? >> operating pressure. households are feeling wealthier because of what happened in the market. two big companies had disappointing earning, oracle and fedex. i like u.s. equities and i like companies that do a lot of business in the u.s. and north america. you saw the transports get hammered but j.b. hype didn't.
they rolled off of fedex, those with business here in north america, like j.b. hunt, i like those. >> they are firms that are competing well in the committee and you mentioned a few of them. there's traction in the u.s. committee right now, we are seeing it out of home building. i think with fedex, a lot of it is a global issue for then also. but if you look medium term right now, there's good firms doing great business. >> bernanke did say at different moments in that press conference, he said stocks are not over called in relation to inflation. right? because we have not hit the real peak, it's about 20% from here if you adjust for inflation. we have had had a nominal peak and it's not over valued in terms of profits or the gdp of the economy. bernanke is kind of saying, go ahead and buy more stocks. i want to ask what you think of
him saying that. >> this was to inflate it this way so we can transmit monetary policy into the economy. this is one way to do it. and it's had that effect. but, you know, we will see how long that lasts. >> he had a lot of good numbers. you have have become more optimistic in the month or so because of the numbers. >> productivity, you mentioned, a more stable and stronger dollar. i not -- i do not like the fed cheering. i think the feds should stay away from that and focus on policy. >> but they want, as tony said, as we all know, they want the stock market to roar. they want to make it so cheap to own risky assets like bonds so everyone will go into the stock market. that has been the policy, basically the policy has worked. >> yeah, it's also been strong
earnings, if you look at output per employee, up 25% the last four years, that is incredible. so, i think it's alleviated the pressure on profits. >> the fed can ease its head off but if companies are not profitable, the stock market will go down not up. >> i cannot get back to this enough, you look at a lot of firms, a lot of big multiple national firms and firms that are just operating here in the united states. they did an amazing job over the past four to five years of becoming incredibly efficient. you know, with them not hiring as much as we would like to see them hire, they are poised to compete in this economy and global economy. they are doing it, we are seeing them succeed in a lot of different ways. the productivity story is good. that is where elevating standard of living comes from. that is -- we are looking at more confidence going forward
now. >> and the dycotomi has been that the smaller businesses have not been able to do that. >> we have to stop picking on them. >> mike and tony will stay with us. situation in cyprus is as dicey as ever. question, will russia come to the rescue? will the banks there ever reopen? and will it stay in the eu? we've reports from moscow and cyprus, coming up next, please stay with us.
>> situation in cyprus getting worse today, banks will not open until next week at the he earliest. good evening michelle. >> larry, another day, another attempt to try to come up with a rescue plan for cyprus, today cyprus suggested that they would try to raid a pension fund, and promise to pay the workers down the road. but that idea was not liked. additionally they are trying get money from trussia. there's a deep and close relationship with russia, they are trying to come up with a deal or a bailout. so far they are empty handed.
in the meantime the banks are closed. the european central bank is flying in cash so the ats have money, they can only do it for so long. they can not under insolvent banks. and two of the banks are clearly insolvent. so they have a choice of shutting down a couple of banks or leaving the euro. >> as michelle said, the big part of the story is russia. will russia rescue cyrus and their own tax laundering haven. steve is in moscow. >> reporter: yes they came to russia looking for financial support for their country after they brokered a deal in the terms of the european union. the russians have a lot of skin in the game, a huge amount of money flows between the two
countries and cyprus has become an off shore type bank for them. in the interest of the russians to get a deal. but i spoke earlier to the finance minister of cyprus about the prospects of a deal. in terms of the support are we talking about a change of items for the current -- change of terms for the 2.5 billion euro loan and more in addition to that? >> no we are talking about it in terms beyond that. >> what terms would those be? >> we don't know yet, we don't know yet. we don't have any deals and we are continuing the discussions and they are waiting for us for discussions in another place. >> how long will the discussions take? >> we will be here until we get some agreement. it appears that late in the day, larry, we have not got a deal between the russians and cyprus,
despite the fact that russia has an enormous amount to lose from the cyprus banks failing. they may be waiting to see how negotiations go with the eu and cyprus. >> thank you, appreciate i want. let's bring in ben steele. he is author of the new book, still with us, michael and tony. there's gold in this story, my friend. my take is if the russians don't do it cyprus is finished, that is it. >> they are three major players involved in the delicate negotiation. the bank that is keeping them alive, but they have threatened to withdraw all their assistance if cyprus did not meet the terms
of the eu, they are now going to moscow looking for funds. two problems, moscow is unlikely to come up with the funds that cyprus needs. not nearly enough, maybe a few billion, and secondly they are likely to anger the eu and the germans in particular. so these are sensitive discussions. >> beyond this, this is chump -- i don't don't understand this, this is chump change for germany. you darn well, ben, all the dirty money laundering that the russians engaged in, they do not want outsiders to have a clean look at the books and record keeping, they would love to have a handle on these things so they can still do the illegal stuff they have been doing. >> i agree with you, larry. first, they are speculative investments the gas fields in cyprus, nobody knows what is
there and what it's worth yet. that's the first problem and the second is that energy, right now, larry is a very sensitive international geopolitical issue, brussels has a strong interest and berlin has a strong interest and they may object to any terms that cyprus reaches with moscow. >> it's a political story, i find it ironic, russia can save cyprus, there by saving the whole euro zone so it does not unravel, there by saving the rest of the world's economy, russia have we come to this juncture? >> maybe, we have. look, you know, cyprus is such a unique situation. you know, here for the russians and for the europeans, why it should be this critical to europe at the end of the day, you know, it just doesn't make any sense. >> you know why, it's because they are washing all the dirt money. that is why cyprus is critical,
and i don't think that it's just russian money, there's european money. >> there may be, right? that is why you have to have little sympathy here for cyprus, it should come as no surprise to them what was going on here with their banking system. >> i mean, it's a good thing that mitt romney did not have any money in the cyprus banks. seriously, russia bailing out -- question, if cyprus leaves the euro zone, so what? does anyone care? >> no, and ben made a good point about the difficulty of valuing the gas reserves from what i heard, that may be the best p s option, it will not add more debt. if you borrow more money, we will not give you bail out. what other option do they have? >> ben steele, let me ask you, so, if cyprus is kicked out of the you're he oh -- the euro zone, does that trigger a run on leaving the euro zone, is greece
next or does anybody care? >> it may very well lead to a crisis in the eu, larry. the cyprus is forced by the eu to abrogate the deposit insurance scheme, what does it mean for deposit insurance schemes throughout the eu, we could see a run on spanish banks and italian banks and u.s. money market funds are heavily exposed to european banks so there could be problems within the united states. >> so we may need russia to save the economy. holy cow, how did we get to this point. many thanks to ben steele, thank you for your contributions now, moving right along, is the republican party about to split apart or expand the base by becoming more ininclusive? we are about to talk to nkelly ayott who wants to get rid of a
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liberal thinking on social issues like gay marriage. the religious right may not like that, the others may not like the immigration reform. my question is simple, can the gop pull it off or will it get split in half? >> larry, i think that the gop, it's healthy what is happening that we are looking at what happened in the last election. and being the party for everyone. i think one of the things that was really telling for me, is that we lost the who cares about me provision. if you look at the exit polling and our principals apply to everyone. you think of free market principals, upward mobility and fiscal responsibility and it appeals to young people who are going to be burdened with the debt that is going to happen with what the democrats want and the president wants for the fiscal state of the country. absolutely this is a party where our principals apply to everyone. and they go back to the american principals of what made the country great. >> worked for reagan years ago
and he was a believer in the big ten, what you are describing and others are describing is a return to the big ten. but just let me ask you, is it clear now, it sounds like it, rand paul gave a speech. is the gop committed to an immigration reform bill that will have big influence on how the party thinks? >> well, larry, i'm not part of the group that is working this out, but it's a very important issue that we have been talking about of wanting to make sure that, hey, our immigration system is broken. it needs reform, and we are a country of immigrants and opportunities. so, i think there's a real opportunity for the gop to lead this effort in a way that also makes sure that we don't have another wave of illegal immigrants and we can with do both. >> and last one, i want to get to this, will the republican party allow more socially liberal people in the northeast particularly, just to be part of the republican party without finger pointing or insinuations
or beating the heck out of them in primary debates, can that happen? the gop got hurt badly on the issues last time-out. >> every state, we need to get the best candidate in each state that can win elections and i think that every state is going to nominate that candidate who is best to win the election. that means a broad tent. what also got us in last elections is making sure we have the best candidates and we had some candidates obviously with what happened in missouri and indiana, that just said dumb things. and you know, let's stop doing that and making sure that we are talking to all people about our principals, about economic growth and fiscal responsibility. >> well said, thank you for that. the missile to nowhere, i don't know that i have heard of a republican that did not like a defense missile, you have to knock one out that is worth $380 million, tell us about it.
>> this is just ridiculous, larry, so $380 million in the continuing resolution that was just on the senate floor, over a trillion dollars in spending and yet we have sequester $380 million for a missile to nowhere that the army does not want that will never produce anything. we have already spent $3 billion on it. so my amendment was to strike that wasteful spending and by the way, it has bipartisan support. the democratic chairman of the armed services amendment called it a waste of money. can you believe it in we cannot strike $380 million of wasteful expending and put that money to real use for our troops and that's why -- >> you know, harry reid a accused the sequester of killing the eight marines.
this terrible the exercise, reid of all people should want to save money in the pentagon in order to put more money back in training which i may add that the marine corp denied, but the point is, you are up his alley, why is he not behind you on this? >> i agree, if we cannot cut something like that, how do we address the $17 trillion in debt. this is why the american people get so frustrated with washington, we continue to spend their taxpayer dollars on, we have spent $3 billion on this program, we will never gaet result that the troops can use and members of both parties said it's wasteful, it would have passed if i could have gotten a vote for it. >> i have a bit of time. is it possible? i know the obama charm offensive, i hope you are too.
>> if we are not talking to each other, we will never do anything. >> senator, i'm interested in balancing the budget and in pro growth, corporate and business tax reform, can you tell me that that is going to be part of it? not just root canal without noracain, yes or no? >> yes, absolutely. pro growth corporate tax reform, sign me up now. >> thank you, we will see you tomorrow evening.